This is a simple, 2 minute article designed to explain what ‘NPS’ means, where the idea came from, why it is used, and how to calculate your Net Promoter Score.
Net Promoter Score (‘NPS’) is – quite simply – a measure of how your customer base splits between ‘Promoters’ (those who are happy to promote you to others), and ‘Detractors’ (ie. your ‘liability’ customers).
Whether or not a customer is a ‘promoter’ or ‘detractor’ is determined by asking them the following question:
“How likely is it that you would recommend [company X] to a friend or colleague?
This question is usually answered on a scale from zero to ten, where zero means “not at all likely”, and ten means “extremely likely”.
A higher number therefore means more of your customers are willing to promote you. A lower number means more of your customers are ‘detractors’ (taken literally, this means that they are likely to speak badly about you).
NPS has become the most widely adopted customer satisfaction metric, used by tens of thousands of companies across the world, in sectors from retail to health to travel, including some of the worlds best known brands – from KFC to Lego to Zappos. Even Apple, commonly thought of as leading their customers rather than listening to them, uses Net Promoter Score to monitor all of their retail stores every day.
A tiny bit of history
Net Promoter Score (which was later rebadged as the ‘Net Promoter System’) was created by Fred Reichheld, a Harvard MBA graduate, Bain consultant, and author of several books including ‘The Loyalty Effect’, ‘Loyalty Rules’ and ‘The Ultimate Question’. Net Promoter Score was first mentioned in Reichheld’s 2003 Harvard Business Review article “One Number You Need to Grow”. Fred explained that one of the purposes of the number was to remove the complexity of satisfaction surveys, and create something that could actually be used by companies to help fuel growth:
Calculating NPS
The central scoring premise of NPS is to calculate a score based on the number of your customers who are ‘detractors’, to calculate the number who are ‘promoters’, and to perform a simple calculation on those as a percentage of the total number of responses. The score asks a simple question:
As mentioned, the question is answered on an 11 point scale (0-10), where 0 means the customer would not recommend; 10 means they would be extremely likely to recommend. Based on the answer to that, customers are grouped into one of three groups:
- Promoters: scores 9 or 10
- Passives: score 7 or 8
- Detractors: score 6 or below.
By only focussing on the most enthusiastic customers, NPS aims for genuine satisfaction rather than shoulder shrugging mediocrity (or ‘passive satisfaction’ as it is strictly termed).
The calculation itself is simple:
- Gather together all of your responses.
- Calculate the percentage of responses answering “9” or “10” (promoters)
- Calculate the percentage of responses answering between “0” and “6” (detractors)
- Minus the percentage of detractors from the percentage of promoters.
For example, if you had just 10 respondents, and 6 of them were promoters (ie. gave an answer of “9” or “10”), 2 of them were passive (gave an answer of “7” or “8”), and 2 of them were detractors (gave an answer of “6” or below), your calculation would be as follows:
- You had 10 total responses.
- 6 of them were promoters. 6 is 60% of 10.
- 3 of them were detractors. 2 is 20% of 10.
- Your NPS would therefore be 60-20, which is 40.
Net Promoter Score is designed to be actionable. In other words, the idea is that you measure it at regular intervals, and take action in between those intervals to turn more of your detractors into promoters.
